GREET news for ATJ: Industry welcomes US tax credit guidance for SAF

opinion

by Fayaz Hussain

December 21, 2023

Having kept the industry waiting for 18 months, the Biden Administration suddenly announced its blueprint on tax credits for US-based ethanol-to-jet sustainable aviation fuel (SAF) producers.

While this is good news for the alcohol-to-jet market, producers now need to wait until March 2024 for more details as the US government updates the Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model, the US ethanol industry’s preferred tool for calculating SAF’s lifecycle greenhouse gas emissions.

While the current GREET model opens the door for base credit access, a revamped version scheduled for next March holds the key to potentially bigger prizes.

According to US Treasury notice 2024-06: “The updated GREET model will provide another methodology for SAF producers to determine the lifecycle GHG emissions rates of their production for the purposes of qualifying for the SAF Credit for SAF sold or used during calendar years 2023 and 2024.”

This methodology will be jointly developed with input from US Department of Agriculture, Department of Energy, Environmental Protection Agency, Department of Transportation and Federal Aviation Administration – which are all part of the SAF Lifecycle Analysis Working Group under the Inflation Reduction Act.

The Clean Fuel Alliance said the guidance will help US farmers and fuel producers in meeting president Biden’s ambitious aviation emissions goals: “Enabling US taxpayers to access a lifecycle model developed by US national labs is clearly the best way to provide assurance to fuel producers and meet the demand for low-carbon fuels from airlines and passengers.”

The corn industry also welcomed the announcement, having extensively lobbied for the use of GREET model over the alternative CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) system used in much of the rest of the world. (We covered the GREET vs CORSIA debate at the heart of US ethanol tax credits in our last week’s newsletter.)

Harold Wolle, president, National Corn Growers Association expressed optimism: “Given that GREET was created by the US government and is widely respected for its ability to measure reductions in greenhouse gas emissions from the farm to the plane, we are encouraged that Treasury will adopt some version of this model.”

But not everyone is celebrating. The ground transport industry, in particular, is not happy. “The truck stop, fuel marketing, trucking and rail industries along with the environmental community have long observed that the present statutory language of the SAF tax credit does not create a pathway for applying the current GREET life-cycle model to SAF,” said David Fialkov, executive vice president for the National Association of Truck Stock Operators. The Treasury Department says the updated GREET model will solve this.

Some clean energy advocacy groups have argued that ethanol should not qualify for tax credits as its production emits large amounts of CO2 in the atmosphere resulting in zero environmental benefit on net basis. The International Council for Clean Transportation said the recent guidance from the US Treasury “punts” the key issues till March next year.

“Affirming the use of the GREET LCA model to assess the life-cycle GHG intensity of SAF’s is not much different than promising to use Microsoft Excel,” said Nik Pavlenko, programme leader, ICCT. “Sure, it’s a powerful analytical tool, but the inputs and assumptions that go into it are far more likely to determine the implications of the credit on the SAF industry, rather than the model itself. Those have yet to be determined.”

US alcohol-to-jet producers are ending the year on a high note. They just need to wait until March to really celebrate.